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    FLSA (Fair Labor Standards Act) & COBRA

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    1. Do you think that both the FLSA (Fair Labor Standards Act) of 1938 and the COBRA (Consolidated Omnibus Budget Reconciliation Act) are as effective today as they were at the time they were passed.

    2. What recommendations would you make to update and improve both laws? (at least 4 pages of information).

    Thank you.

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    Solution Preview

    Let's take a closer look at the business literature, which you can draw on for your final copy. I also attached an illustrative example and an article with proposed reform and updates of FLSA for the 21st century.


    1. Do you think that both the FLSA Fair Labor Standards Act of 1938 and the COBRA Consolidated Omnibus Budget Reconciliation Act are as effective today as they were at the time they were passed?

    A. COBRA (Consolidated Omnibus Budget Reconciliation Act) (1985)

    Who Must Comply - COBRA is an IRS and DOL law. This explains why the employee count "test" is determined on a Jan. 1 to Dec. 31 time frames. All health plan sponsoring employers having 20 or more employees over half the typical business days in the preceding calendar year, must comply with COBRA continuation provisions for participants losing insurance during the next calendar year. The employer exceptions are: 1) The Federal Government, 2) Church Plans (as defined in section 414(e) of the IRS Code) (http://www.hrresource.com/glossary/COBRA/).

    Specifically, COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage However, COBRA's protections are temporary and are intended as a stopgap until insurance is obtained from another source, such as a new employer. (http://www.hrresource.com/glossary/COBRA/).

    The COBRA law is actually a very simple law. It identifies Qualified Beneficiaries - employees and dependents active on the coverage the day before the COBRA qualifying event. Should a Qualified Beneficiary lose insurance benefits because of certain specified reasons (qualifying events) they are allowed to continue the same Health Plan benefits as the non-COBRA participants. These benefits will be provided on a self-pay basis. This premium may also include a 2% administrative fee. While the concept of the law is simple, however, the administration of COBRA is much more difficult. Strict timelines for notices, elections, and payments are specified in the law. Stepping outside, or not following the provisions of the law, could result in the employer totally self-insuring a claim situation or risking discrimination or litigation. Again, this is an employer law. If the employer stays within the letter of the law, the carrier or third party administrator must abide by the law. But, if the employer steps outside the letter of the law (exceptions), they will likely be stepping outside by themselves - the carrier is not required to support the "outside of the law" activity (http://www.hrresource.com/glossary/COBRA/).

    a. Perhaps one area of recommendation is to be more flexible

    From another source:


    Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, is a law passed by the U.S. Congress, that mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving employment. COBRA includes amendments to the Employee Retirement Income Security Act of 1974 (ERISA). Although this statute became law on April 7, 1986, its official name is the Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub.L. 99-272, 100 Stat. 82). Because of the discrepancy between the official name of the Act and the year in which it was enacted, some government publications refer to the Act as the Consolidated Omnibus Budget Reconciliation Act of 1986. The Act is often referred to simply as "COBRA".

    The Act allows both workers and their immediate family members who had been covered by a health care plan to maintain their coverage if a "qualifying event" causes them to lose coverage. Among the "qualifying events" listed in the statute are loss of benefits coverage due to (1) the death of the covered employee, (2) a reduction in hours (which can be the result of resignation, discharge, layoff, strike or lockout, medical leave or simply a slowdown in business operations) that causes the worker to lose eligibility for coverage, (3) divorce, which normally terminates the ex-spouse's eligibility for benefits, or (4) a dependent child reaching the age at which he or she is no longer covered. COBRA imposes different notice requirements on participants and beneficiaries, depending on the particular qualifying event that triggers COBRA rights. COBRA also allows for longer periods of extended coverage in some cases, such as disability or divorce, than others, such as termination of employment or a reduction in hours. COBRA does not apply, on the other hand, if employees lose their benefits coverage because the employer has terminated the plan altogether.

    COBRA does not, unlike other federal statutes such as the Family and Medical Leave Act (FMLA), require the employer to pay for the cost of providing continuation coverage; instead it allows employees and their dependents to ...

    Solution Summary

    This solution discusses if the FLSA (Fair Labor Standards Act) of 1938 and the COBRA (Consolidated Omnibus Budget Reconciliation Act) are as effectiveness today as they were in the past, as well as the recommendations to update and improve both laws. Supplemented with examples of updates and information on the two acts.